Profitability’s Hidden Menace
Something is happening in the U.S. that is heavily impacting productivity, driving costs ever higher, and lowering profits. This nemesis to small business is something we are all familiar with, but rarely think of in these terms. What I’m talking about here is…allergies! I guess technically it’s called allergic rhinitis (my family calls it hay fever). During the past 15 years the number of people suffering from allergies has doubled, and related medical expenses has increased 338%.
Here are some interesting statistics that may surprise you:
- In 1995, allergies resulted in 1 million missed workdays.
- In 2010, allergies will result in 6 million missed workdays—up from 4 million just 5 years ago.
- In 1995, there were 7 million doctor visits to treat allergies.
- In 2010, there will be 16 million doctor visits to treat allergies—up from 13.1 million just 5 years ago.
- In 1995, medical expenses to treat allergies was $4 Billion.
- In 2010, medical expenses to treat allergies will be $17.5 Billion—up from $6.1 Billion in 2000.
Apparently, a large contributing factor to these trends is that in North America spring arrives 10 to 14 days earlier than it did 20 years ago, resulting in a longer pollen season. Also, as average temperatures rise, they boost the proliferation of pollen-producing trees like oak and hickory. This is particularly true in the Midwest and eastern U.S. Some experts predict that, due to fossil-fuel emissions, pollen production could double by the year 2100.
Just one more thing for small business owners to deal with, and there doesn’t seem to be any clear solution. It looks like increased absenteeism and higher healthcare costs are going to be a considerable cost of doing business in the coming years. More things to make being a business owner in the U.S. even more difficult.
Any suggestions?
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Small Business Loan
A small business loan is difficult to come by in today’s climate of scarce bank financing. That means that businesses must resort to other forms of money acquisitions (along with parsimonious spending).
Some small businesses can go back again to family and friends, while others may get additional help from their outside investors. Businesses are also getting creative regarding financing by acquiring loans from vendors, employees, customers, communities, etc.
But one place for getting a small business loan that many smaller businesses are not aware of is Peer-to-Peer Lending—obtaining a loan from your peers. Peer-to-peer lending brings anonymous people together…lenders and borrowers…electronically in a double-blind auction through technology similar to the type eBay uses.
All indications are that this type of lending is growing in popularity and has helped many businesses cope with the shortage of money from banks.
Peer-to-peer loans are usually small in size—currently around $25,000 maximum—but they have been much higher in the past and will likely increase again as the economy improves.
It is also necessary to have a fairly good credit rating to get an acceptable interest rate, which can run from 6% to 35%. Some lenders have minimum credit scores, while others apparently do not.
Here are some of the more popular peer-to-peer lending sites;
Us.zopa.com (UK headquartered)
If you’re looking for a small business loan to finance the acquisition of a piece of equipment. or a special project, peer-to-peer lending might just work for you.
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Another View of Employment Numbers
Almost all business people are familiar with the company Intuit, Inc., and the software they offer, as well as their online payroll services. But I only recently discovered that they also publish a monthly Small Business Employment Index, based primarily on the data they have on the 50,000 small business payroll customers they serve.
Each of these customers have fewer than 20 employees, so this is a highly representative statistical sample of small business employment…probably better than the federal government’s numbers.
The Index was developed and is overseen by Dr. Susan Woodward, a nationally recognized economist. Here is what the Small Business Employment Index presents for May 2010:
- Small business employment grew by 0.1 percent, translating into approximately 25,000 new jobs in May. This compares to new jobs in February of 40,000; March of 50,000; and April of 66,000.
- Monthly hours worked declined in May to 101.6 per employee. This translates into an average workweek of 23.5 hours for hourly employees.
- Compensation in May grew by 0.3 percent to $2,566 per month. This translates to about $30,800 per year for all hourly employees.
The good news is that employment is still growing in the small business sector, although May shows a sharp decline in the rate of growth. Let’s hope that May was simply an anomaly and that June will continue to show a more robust growth in employment.
Remember, the Intuit Small Business Employment Index is based on a 50,000 small-business sample of all U.S. businesses with fewer than 20 employees. Also, that this sector makes up 87 percent of all businesses in the U.S.
How to Become an Entrepreneur
I’m often asked how to become an entrepreneur, and I am usually reluctant to answer, because becoming an entrepreneur is such an individual endeavor. No two people have exactly the same dream, the same knowledge base, the same commitment, the same personality… I think you see what I mean. This is why so many classes on entrepreneurship fail—they can provide some basic business knowledge, but they cannot teach you how to become an entrepreneur.
At the same time, there are general traits that every entrepreneur must have, as well as a few activities you must perform in order to have a successful business. Basically, here is what you need to become an entrepreneur:
Passion. Some go so far as to say you must be “obsessed” if you want to build a successful business. Do you lie awake at night thinking about your business? Do you put money into your business startup fund instead of buying that Latte every morning? Are you frequently making notes and plans for your business? Do you know why you are passionate about this business? If you are not possessed by your passion, don’t start a business until you are. If you are still looking for the perfect business idea, keep searching until you find the idea that stirs your passions—you’ll know it when you see it.
People Skills. Last week I wrote about a person on TV who was doing everything wrong while trying to become an entrepreneur. It primarily had to do with this person’s interpersonal relationships…although she had an MBA, she had no core knowledge of her business and could not lead her employees—they were like a ship without a rudder. She did not understand her customers, and therefore built no loyalty…and on and on. It doesn’t matter whether your business is brick and mortar, or online, you will have to deal with customers, and hopefully, employees at some point. So, people skills are mandatory if you want to become an entrepreneur—at least a successful entrepreneur.
Be a Copycat. Don’t reinvent the wheel…look at people who have the same passion, for the same type of business, as you do. Then, copy what the successful ones are doing. Don’t be afraid to ask them how they do it—they will often share their passion, knowledge, and methods with you. This simple activity can save you the time, money, and aggravation you might expend making all the same mistakes others have already resolved.
Plan, Plan, Plan. By “plan,” I don’t mean writing a typical business plan. Except for presentations to investors—formal business plans are useless. I’m talking here about plans written on whiteboards and cocktail napkins. The writing down of thoughts, innovations, and ideas as they occur to you. It is important that you visualize starting and running your business, and then capture in writing, every idea and thought you have during this process. Five million (yes, million) businesses will fail this year, and most of them because they didn’t plan out their business thoroughly. But remember that Business Plans are made for banks and investors—“planning” is for you and your successful business.
Gather Knowledge. It is important that you have core knowledge about whatever your business produces in the way of products or services. For instance: If you open a tax consultation service, you had better know something about taxes. You also should have a basic knowledge of business, e.g., requirements of the law, accounting, marketing, sales, customer service, and the like. Basic business knowledge can be learned through classes and adult education, as well as books and online courses. So, continue to learn while you do your planning.
Start! There are thousands of drawers and shelves around the world that hold the remnants of people’s business dreams. There are simply too many people who dream, and plan, and wish…but never suck it up and actually start a business. Dreams made—dreams lost. Develop your planning and gather your knowledge—then commit. All the planning and knowledge in the world won’t help if you never get started. Yes, it’s scary, but if you have the passion, you will start in spite of your fear, and become a better entrepreneur for it. So, START!
That is a pretty basic set of guidelines on how to become an entrepreneur, but if you follow them, you will substantially increase your chances of making your new business a success.
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Forget Tax Incentives!
With Congress and the Administration wringing their hands over how big to make tax incentives for small business so they will hire more people; they are—as usual—totally missing the boat. Tax incentives to hire more people will do little to increase jobs. As one small-businessman said in an interview the other night, “Tax incentives are nice and I’ll take them, but they do not encourage me to hire more people. Why would I hire someone that I have no work for and then turn around and lay them off again?”
What is really needed is more work! When small business owners have more work for their workforce, don’t think for a minute that they won’t hire the people they need to do that work—whether there are any tax incentives or not. That’s why they are called “business” owners.
All this haranguing and carping in Washington simply proves even further just how far out of touch with the real world our politicians actually are. Until demand for small business products and services increases, small business owners will NOT hire more people. It’s as simple as that.
Good News for Small Business
It looks like action is finally being taken to unfreeze credit to small businesses. In a business roundtable at the White House, President Obama outlined actions to help small business, and get credit flowing again. As the President pointed out, this is just a first step in getting small business back up to speed, so they can begin hiring again.
Here is a CNN edited clip of President Obama’s speech to the business gathering.
(email subscribers–view on the blog)
This is what small business people have been waiting to hear. It is definitely a start to get small businesses back on track. There is still much to do about healthcare and taxes as they relate to small business, but it is encouraging to see the government taking steps to improve the current situation.
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